Social Credit System

The Social Credit System (Chinese: 社会信用体系; pinyin: shèhuì xìnyòng tǐxì) is a national reputation system being developed by the Chinese government.[1][2][3] By 2020, it is intended to standardise the assessment of citizens’ and businesses’ economic and social reputation, or ‘credit’.

As of mid-2018, it is unclear whether the system will be an ‘ecosystem’ of various scores and blacklists run by both government agencies and private companies, or if it will be one unified system. It is also unclear whether there will be a single system-wide social credit score for each citizen and business. By 2018, some restrictions had been placed on citizens, which state-owned media described as the first step toward creating a national social credit system.[9][10][11][7][12][13]

Simplified Chinese 社会信用体系
Traditional Chinese 社會信用體系

The system is a form of mass surveillance which uses big data analysis technology.[14]

Implementation by Chinese government
Plan for implementation between 2014 and 2020

On June 14, 2014, the China’s State Council issued an outline for the national social credit system, it was titled “State Council Notice concerning Issuance of the Planning Outline for the Construction of a Social Credit System (2014–2020)”.[15][16] Law scholar Rogier Creemers translated the document into English.[15][1]

The plan shows the government wants the basic structures of the Social Credit System to be in place by 2020.[15] The goal being “raising the awareness for integrities and the level of credibility within society.”[16] It is presented as a means to perfect the “socialist market economy” (完善社会主义市场经济体制) as well as strengthening and innovating societal governance (加强和创新社会治理).[16] This indicates that the Chinese government views it both as a means to regulate the economy at a business level and as a tool of governance to steer the behavior of citizens.

The outline focuses on four areas: “honesty in government affairs” (政务诚信), “commercial integrity” (商务诚信), “societal integrity” (社会诚信), and “judicial credibility” (司法公信).[15] The Chinese government’s plans includes credit assessment of businesses operating in China.[8]

The Social Credit System is an example of China’s “top-level design” (顶层设计) approach. It is coordinated by the Central Leading Group for Comprehensively Deepening Reforms.[8]

It is unclear whether the system will work as envisioned by 2020, but the Chinese government has fast-tracked the implementation of the system, resulting in the publication of numerous policy documents and plans since the main plan was issued in 2014. If the Social Credit System is implemented as envisioned, it will constitute a new way of controlling both the behavior of individuals and of businesses.[8]
Progress of implementation (2013–present)

In 2013, the Supreme People’s Court (SPC) started a blacklist of debtors with roughly thirty two thousand names. The list has since been described as a first step towards a national Social Credit System by state-owned media.[17][18]

In 2015, the People’s Bank of China licensed eight companies to begin a trial of social credit systems.[19][20] Among these eight firms is Sesame Credit, owned by Alibaba Group, Tencent, as well as China’s biggest ride-sharing and online-dating service, Didi Chuxing and Baihe.com, respectively.[21][19] In general, multiple firms are collaborating with the government to develop the system of software and algorithms used to calculate credit.[21][22] The SPC also began working with private companies – for example, Sesame Credit began deducting credit points from people who defaulted on court fines.[17]

The government originally considered that the Social Credit System be run by a private firm, but it has since acknowledged the need for third-party administration.[19][when?]

In 2017, no licenses to private companies were granted.[19] The reasons include conflict of interest, the remaining control of the government, as well as the lack of cooperation in data sharing among the firms that participate in the development.[19] However, the Social Credit System’s operation by a seemingly external association, such as a formal collaborative between private firms, has not been ruled out yet.[19] Private companies have also signed contracts with provincial governments to set up the basic infrastructure for the Social Credit System at a provincial level.[23]

As of March 2017, 137 commercial credit reporting companies are active on the Chinese market.[8] As part of the development of the Social Credit System, the Chinese government has been monitoring the progress of third-party Chinese credit rating systems.[4]

As of February 2018, no comprehensive, nation-wide social credit system exists, but there are multiple pilots testing the system on a local level as well as in specific sectors of industry.[24] One such program has been implemented in Shanghai through its Honest Shanghai app, which uses facial recognition software to browse government records, and rates users accordingly.[25]

In March 2018, Reuters reported that restrictions on citizens and businesses with low Social Credit ratings, and thus low trustworthiness, would come into effect on May 1st.[26][27] By May 2018, several million flight and high-speed train trips had been denied to people who had been blacklisted.[10]

As of mid-2018, it is unclear whether the system will be an ‘ecosystem’ of various scores and blacklists run by both government agencies and private companies, or if it will be one unified system. It is also unclear whether there will be a single system-wide social credit score for each citizen and business.[9][10][11][7][12][13]
Implementation of technology platform

It is unclear what technology will be used in the fully implemented system. As of mid 2018, only pilot schemes have been tested.[9][10][11][7][12][13] Some of the technology is provided by the Alibaba Group’s Ant Financial.[21][19] Alibaba is China’s largest conglomerate of online services, including the largest online shopping and payment providers.[21]
Data collection

The Chinese government aims at assessing the trustworthiness and compliance of each person.[21][clarification needed] Data stems both from peoples’ own accounts, as well as their network’s activities. Website operators can mine the traces of data that users exchange with websites and derive a full social profile, including location, friends, health records, insurance, private messages, financial position, gaming duration, smart home statistics, preferred newspapers, shopping history, and dating behaviour.[21][clarification needed]
Data structuring

Automated algorithms are used to structure the collected data, based on government rules.[21][clarification needed]
Implications for citizens

From the Chinese government Plan for Implementation, the SCS is due to be fully implemented by 2020. Once implemented the system will manage the rewards, or punishments, of citizens on the basis of their economic and personal behavior. Some types of punishments include: flight ban, exclusion from private schools, slow internet connection, exclusion from high prestige work, exclusion from hotels, and registration on a public blacklist.
Travel ban

By May 2018, several million flight and high-speed train trips had been denied. The people denied were on a blacklist. The exact reasons for people being placed on the list are unknown. Business Insider speculated that the reason could be the debtors list created by the SPC.[10]
Exclusion from private schools

If the parents of a child score below a certain threshold, their children would be excluded from top schools in the region.[28]
Social status

One’s personal score could be used as a social symbol on social and couples platforms. For example, China’s biggest matchmaking service, Baihe, already allows its users to publish their own score.[29]
Other

The rewards of having a high score include easier access to loans and jobs and priority during bureaucratic paperwork. Likewise, the immediate negative consequences for a low score, or being associated to someone with a low score, ranges from lower internet speeds to being denied access to certain jobs, loans and visas.[30][31][32]
Implications for businesses

Among other things, the Social Credit System is meant to provide an answer to the problem of lack of trust on the Chinese market. Proponents argue that it will help eliminate problems such as food safety issues, cheating, and counterfeit goods.[33] China claims its aim is to enhance trust and social stability by creating a “culture of sincerity”.[21]

For businesses, the Social Credit System is meant to serve as a market regulation mechanism. The goal is to establish a self-enforcing regulatory regime fueled by big data in which businesses exercise “self-restraint” (企业自我约束). The basic idea is that with a functional credit system in place, companies will comply with government policies and regulations to avoid having their scores lowered by disgruntled employees, customers or clients.[8] As currently envisioned, companies with good credit scores will enjoy benefits such as good credit conditions, lower tax rates, and more investment opportunities. Companies with bad credit scores will potentially face unfavorable conditions for new loans, higher tax rates, investment restrictions, and lower chances to participate in publicly-funded projects.[8] Government plans also envision real-time monitoring of a business’ activities. In that case, infractions on the part of a business could result in a lowered score almost instantly. However, whether this will actually happen depends on the future implementation of the system as well as on the availability of technology needed for this kind of monitoring.[8]
Geographic region

The Social Credit System will be limited to Mainland China and thus does not apply to Hong Kong and Macau.[citation needed] However, at present, plans do not distinguish between Chinese companies and foreign companies operating on the Chinese market, raising the possibility that foreign businesses operating in China will be subjected to the system as well.[8]
Criticism

The system has been implicated in a number of controversies. Of particular note is how it is applied to individuals as well as companies. People have already faced various punishments for violating social protocols. The system has been used to already block nine million people with “low scores” from purchasing domestic flights.[34] While still in the preliminary stages, the system has been used to ban people and their children from certain schools, prevent low scorers from renting hotels, using credit cards, and blacklist individuals from being able to procure employment.[34] The system has also been used to rate individuals on their internet habits (excessive online gaming reduces one’s score), personal shopping habits, and a variety of other personal and wholly innocuous acts that have no impact on the wider community.[35] Criticism of this program has been widespread with the proposed system being described by Human Rights Watch as “chilling” and filled with arbitrary abuses.[35]

Vision Times labeled the system as a mass surveillance tool and mass disciplinary machine.[36]
Comparison to other countries
United Kingdom

In 2018, the New Economics Foundation compared the Chinese citizen score to other rating systems in the United Kingdom. These included using data from a citizen’s credit score, phone usage, rent payment, etc. to filter job applications, determine access to social services, determine advertisements served, etc.[37][38]
Germany

In February 2018, Handelsblatt Global reported that Germany may be “sleep walking” towards a system comparable to China’s. Using data from the universal credit rating system, Schufa, geolocation and health records to determine access to credit and health insurance.[39]